Malsman v. Brandler

[923]

RICHARDS, J. pro tem.

*

Appeal from a judgment denying plaintiffs, as trust deed beneficiaries, recovery of rents collected by defendant property owners, after notice of default and prior to plaintiffs’ demand for or taking possession of the secured property.

In September 1957, Ben Weinberg and his wife, Estelle Weinberg (now Estelle Brandler) purchased a 10-story store and office building in downtown Los Angeles, commonly known as “The Apparel Center Building.” When so purchased the property was encumbered by a first deed of trust in favor of an insurance company and by a second deed of trust in favor of plaintiffs. As security for the performance of the second deed of trust obligations the real property and the rents therefrom were granted and assigned to the trustee subject to the right of the beneficiaries to collect and apply such rents under a rent collection provision hereinafter set forth.

Commencing December 1, 1961, defendants defaulted in payment of the monthly installments due on the second deed of trust. On or about January 1, 1962, plaintiffs notified defendants of their default and demanded that any rents collected be delivered to plaintiffs. Defendants continued to collect the rents until March 27, 1962, when the instant action was commenced and a receiver appointed.

The court found,

inter alia,

that plaintiffs did not elect to demand possession nor to take possession of the property until the filing of their complaint on March 27, 1962. As a conclusion of law, the court held that the second deed of trust provided for a pledge of rents as additional security to take effect upon reducing the real property to possession and that it did not provide for an absolute assignment of rents to take effect upon default. Judgment was entered that defendants were entitled to retain all rents collected prior to March 27, 1962.

The only contention made by appellant on this appeal is that upon a proper interpretation of the second deed of trust provisions, plaintiffs were entitled to the rents upon trustor’s default without demand for or taking possession of the real property.

It is settled that where a deed of trust contains a clause which merely includes the rents as a portion of the property pledged to secure a debt, only a security interest